Success Story: Manufacturing Footprint Optimization (CS233a)
Creating a manufacturing center of excellence in Mexico and accelerating revenue recognition for a market leading provider of systems and services to the transportation and defense markets.
This story is for CEOs who:
- Want to move manufacturing of all or part of their product line to a lower-cost location
- Need to accelerate revenue recognition
- Want to improve their company’s strategic position to reduce cost, increase cash and accelerate growth
This global high technology market-leading provider of systems and services to the transportation and defense markets has grown rapidly through acquisitions over several years. Maine Pointe was initially engaged to provide visibility to spend and implement sustainable growth and savings throughout the organization. Based on the measurable results delivered, we were invited as a ‘trusted partner’ to assist in two further areas:
- Rationalize the company’s manufacturing footprint by accelerating the transfer of products from US manufacturers to their Mexico facility and driving savings and centralization across the corporation through reduced labor rates.
- Assist the CEO in driving revenue into the firm to meet the targeted financials for the FY2019. This included driving the client’s procurement department and negotiating directly with suppliers to ensure revenued product was delivered prior to year end.
Workstream 1: Accelerating the movement of manufacturing to the Mexico facility
- Introduced fundamental changes to OTD (on-time delivery) and overall quality to support Mexico as a viable alternative to existing sources of supply, with considerable labor saving. As a result of the improved performance, potential transfers were initiated and tested
- Introduced sustainable procedures that will manage all the key steps when transferring manufacturing sites. Material, tooling, planning, etc. were being overlooked prior to this effort
- Changed sending sites’ perspective on the opportunity Mexico offered and were able to move entire product lines to Mexico. For example – 100% of sheet metal cabinets were previously purchased from external suppliers, now 80% are manufactured in Mexico at a 35% overall cost reduction
- Developed long-term plans for future product line manufacturing of key client products. Space, manpower and long-term planning were implemented to facilitate growth in early 2020
Workstream 2: Accelerating revenue generation to facilitate growthMaine Pointe introduced and managed a “war room” supported by ORCI® and TVO tools to identify, track and facilitate the accelerated delivery of billable product.
Details managed were:
- Open purchase requisitions that needed to be placed
- Open purchase orders with delivery profiles, revenue potential and obstacles to delivery
- Technical issues surrounding circuit card deliveries that threatened over 40% of the total revenue anticipated.
- Detailed buyer, program manager, engineering and executive reviews conducted on a daily basis
- Facilitated executive level intervention when challenges were not being addressed rapidly
As a result, we increased the cash coming into the organization by 70% in just 80 days.
Driving cost, cash and growth
The organization now has the ability to reduce cost, maintain quality and accelerate product delivery which, in turn, accelerates the release of progress payments.
The ResultsWorking in partnership with our client in the US and managers at its manufacturing facility in Mexico, Maine Pointe’s subject matter experts delivered the following benefits:
- 70% increase in revenue recognition in 80 days, exceeding the client’s stretch goals
- Led the client in managing the dramatic increase in revenue over a short period of time via purchase order placement, delivery negotiations and favorable terms to completion
- Managed the complex technical issues that arose from three new suppliers of circuit cards and alleviated all barriers to delivery
- Identified and transitioned over 30k labor hours per month that had previously been sourced at domestic locations
- The movement of material at the lower labor rate saved the client $2.7M in six months and established that an annualized savings of $5-7M was available
Maine Pointe is now a 'trusted partner' of our organization and will continue to offer its support as we pursue our profitable growth strategy." Executive VP and CFO
Lessons learned for other executives
- The right consulting partner can provide a level of insight that can be difficult to achieve internally
- If quality and performance suffer as a result of moving production to a lower-cost location, savings mean nothing
- Daily reporting to executive leadership enables buy-in and assistance to ensure important steps and follow up are incorporated